The Economic Contribution that Data Centers Make … Executive Summary This report assesses the economic contribution that data centers make to Prince William County. The principal

The Economic Contribution thatData Centers Make to Prince William County

JANUARY 2016

Acknowledgements

ABOUT NVTCThe Northern Virginia Technology Council (NVTC) is the membership and trade association for the technology community in Northern Virginia. As the largest technology council in the nation, NVTC serves about 1,000 companies from all sectors of the technology industry, as well as service providers, universities, foreign embassies, nonprofi t organizations and governmental agencies. Through its member companies, NVTC represents about 300,000 employees in the region. NVTC is recognized as the nation’s leader in providing its technology community with networking and educational events; specialized services and benefi ts; public policy advocacy; branding of its region as a major global technology center; initiatives in targeted business sectors and in the international, entrepreneurship, workforce and education arenas; the NVTC Foundation, a 501(c)(3) nonprofi t charity that supports the NVTC Veterans Employment Initiative and other priorities within Virginia’s technology community; and The Entrepreneur Center @NVTC, which mentors new technology entrepreneurs. NVTC’s Data Center & Cloud Infrastructure Committee provides a clear, consistent, collective and compelling voice for promoting the interests of our growing data center, cloud and critical infrastructure community in an effort to contribute to the long-term growth and prosperity of the industry.

Visit NVTC at: www.nvtc.org.

We would like to acknowledge and thank the following sponsors of this report:

Report prepared by:

4201 Dominion Boulevard, Suite 114 Glen Allen, Virginia 23060

(804) 346-8446mangumeconomics.com

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Executive Summary

This report assesses the economic contribution that data centers make to Prince William County. The principal findings from that assessment are as follows:

1) Data centers are a high wage/high growth industry:

• The data center industry paid private sector wages in Prince William County in 2014 that were 2.2 times greater than the county norm for all private sector firms.

• The most recent one-year growth rate for private employment in this sector was 2.1 times greater than the norm across all county industries.

• The most recent five-year growth rate for private employment in this sector was 11.8 times greater than the norm across all county industries.

• There is evidence that this sector helped insulate the county from the ”double dip” that the state experienced as a result of the ”Great Recession of 2007” and the federal sequester in 2013.

2) Data centers generate significant tax revenue:

• The data center industry is very capital-intensive and that translates into a disproportionate amount of property tax revenue, by far the largest source of revenue for Virginia localities.

• In 2014, the benefit/cost ratio for the data center industry was 4.3 in Prince William County. This means that for every $1.00 in county expenditures this sector was responsible for generating that year, it provided approximately $4.30 in county tax revenue.

3) Data centers have a big overall economic impact:

• In 2014, the data center industry was responsible for supporting approximately 928 jobs, $54.6 million in wages, and $181.9 million in economic output in Prince William County.

4) In short, the data center industry makes a significant, growing, and demonstrable contribution to Prince William County’s economic prosperity.

1

Introduction

This report assesses the economic contribution that data centers make to Prince William County. The remainder of the report is divided into three sections. The General Contributions section identifies some of the broader economic contributions that the data center industry makes to Prince William County. The Economic Impact section more narrowly quantifies the economic impact that the data center industry had on Prince William County in 2014. Finally, the Conclusion section provides a brief summary and concluding remarks.

General Contributions

In this section we present some of the broader contributions that the data center industry makes to Prince William County. Here, as throughout the report, we use the U.S. Bureau of Labor Statistics’ Data Processing, Hosting, and Related Services sector (NAICS 5182) as our definition of the data center industry.

High Performance Sector

Although the Data Processing, Hosting, and Related Services sector comprises only a small proportion of Prince William County’s total employment (less than half a percent of total private sector employment), it is important to keep in mind that this is a high wage/high growth sector. Figure 1 compares the average weekly wage paid in Prince William County by private sector firms in this industry in the first quarter of 2015 to the average weekly wage across all private sector firms in the county. As these data indicate, average weekly wages in the Data Processing, Hosting, and Related Services sector were 2.2 times higher than the county norm for all private sector firms that quarter. Turning to employment growth, Figure 2 presents the most recent one-year (first quarter of 2014 to first quarter of 2015) and five-year (first quarter of 2010 to first quarter of 2015) growth rates for private employment in Prince William County’s Data Processing, Hosting, and Related Services sector and compares them to the comparable growth rates for total county private employment across all sectors. As these data show, with regard to one-year growth rates, county private sector employment in Data Processing, Hosting, and Related Services grew 2.1 times faster than the private sector norm across all county industries, while with regard to five-year growth rates, county employment in Data Processing, Hosting, and Related Services grew 11.8 times faster than the norm across all county industries.

2

Figure 1: Private Sector Average Weekly Wage in Prince William County’s Data Processing, Hosting, and Related Services Sector Relative to the Private Sector Average Weekly Wage

across All Industries in 2015:Q11

Figure 2: Prince William County Growth in Data Processing, Hosting, and Related Services Private Sector Employment Relative to Total Private Employment across all Industries 2

1 Data Source: Virginia Employment Commission. 2 Data Source: Virginia Employment Commission. One year growth rates encompass the period from 2014:Q1 to 2015:Q1, while five year growth rates encompass the period from 2010:Q1 to 2015:Q1.

$1,619

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Reduces Economic Risk

Prince William County’s Data Processing, Hosting, and Related Services sector also appears to have had an impact in reducing the county’s economic risk profile. Traditionally, Virginia enters a recession later than the country as a whole, is less adversely affected than the country as a whole, and comes out of the recession sooner than the country as a whole. In that regard, the “Great Recession of 2007” impacted the state about as one would expect. Where things went wrong, however, was during the “recovery.” Figure 3 compares the year-over-year change in total private sector employment in Virginia to that of the U.S. as a whole from January of 2008 through March of 2015. Any point above the zero line in this graph indicates positive year-over-year employment growth, while any point below the zero line indicates a decline in year-over-year employment. This graph clearly shows the impact of the “Great Recession of 2007” as employment growth moved into negative territory in early 2008, bottomed out in late 2009, and did not move back into positive territory until late 2010. Although, as these data indicate, throughout that period Virginia continued to do better than the country as a whole. However, starting in mid-2011 that situation changed and Virginia started under-performing the country as a whole. Moreover, in 2013 that divergence became more acute. That shift has generally been attributed to the effect of the 2013 federal sequester, which had a disproportionately large negative impact on Department of Defense contracting expenditures, which in turn had a disproportionately large negative impact on Northern Virginia’s Professional and Business Services sector (in 2013, federal government expenditures in national defense fell to 91 percent of their 2009 level, and have continued to fall since, dropping to 86 percent of their 2009 level in the third quarter of 2015).3 And because Northern Virginia accounts for more than a third of total employment in Virginia, as goes Northern Virginia, so goes the state. The significant and unusual negative impact that this turn of events had on Virginia led many to realize that, to reduce its economic risk profile, the Commonwealth needed to rebalance its economic portfolio and reduce its dependence on federal government expenditures. Among those who came to this conclusion was Governor Terry McAuliffe, who’s announced economic strategy in his New Virginia Economy plan made clear that, “Virginia must take action now to catalyze the growth of the private, nonpublic dependent components of its economy.”

3 Data Source: U.S. Bureau of Economic Analysis.

4

Figure 3: Year-over-Year Change in Private Sector Employment – January 2008 to January

20154 In this regard, it is instructive to note that not all of Northern Virginia was equally affected by the sequester. Figure 4 depicts the year-over-year change in total private sector employment in the Northern Virginia localities of the City of Alexandria, Arlington County, and Fairfax County from the first quarter of 2008 through the first quarter of 2015. The general characteristics of these trend lines are quite similar to the earlier trend line for Virginia as a whole. In both cases, they demonstrate the significant negative impact of both the ”Great Recession of 2007” and the federal sequester of 2013. Figure 5 presents comparable year-over-year change in total private sector employment data for the Northern Virginia localities of Loudoun County and Prince William County. Although these trend lines are similar to the others in regard to the impact of the ”Great Recession of 2007,” they are noticeably dissimilar when it comes to the federal sequester of 2013. Quite plainly – unlike the City of Alexandria, Arlington County, and Fairfax County – Loudoun County and Prince William County did not experience a contemporaneous decline in total private sector employment during the federal sequester of 2013.

4 Data Source: U.S. Bureau of Labor Statistics.

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Figure 4: Year-over-Year Change in Private Sector Employment – First Quarter of 2008 to First

Quarter of 20155

Figure 5: Year-over-Year Change in Private Sector Employment – First Quarter of 2008 to First

Quarter of 20156

5 Data Source: Virginia Employment Commission. 6 Data Source: Virginia Employment Commission.

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Although it is beyond the scope of this report to comprehensively assess why Loudoun County and Prince William County were not adversely impacted by the 2013 federal sequester in the same way that other Northern Virginia localities were, one possible reason has to do with differences in the relative significance of their Data Processing, Hosting, and Related Services sectors. Figure 6 highlights one of those key differences by depicting each of these localities’ five-year growth rate for private sector employment in Data Processing, Hosting, and Related Services.

Figure 6: Five-Year Growth in Data Processing, Hosting, and Related Services Private Sector

Employment 7

Drives Large Capital Investment

One of the more salient characteristics of the Data Processing, Hosting, and Related Services is that it is a very capital-intensive sector that generates very large capital investments. Figure 7 depicts Virginia Economic Development Partnership (VEDP) investment announcements in Data Processing, Hosting, and Related Services in Prince William County for the period from January 1, 1990 through December 1, 2015. As these data demonstrate, since 2007 those investment announcements have averaged $285.6 million per year and reached a high of $600.0 million in 2015.

7 Data Source: Virginia Employment Commission. These growth rates encompass the period from the first quarter of 2010 through the first quarter of 2015.

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Figure 7: VEDP Investment Announcements for Data Processing, Hosting, and Related

Services in Prince William County – January 1, 1990 through December 1, 20158 In addition, it is important to realize the Data Processing, Hosting, and Related Services sector is a high investment sector for Prince William County even relative to other Virginia localities. Figure 8 depicts the top ten localities in Virginia in terms of cumulative VEDP investment announcements in the Data Processing, Hosting, and Related Services sector for the period from January 1, 1990 through December 1, 2015. As these data indicate, Prince William County ranked 2nd among Virginia’s 133 localities over that period in terms of cummulative investment announcements in this sector ($2.4 billion in cummulative investment).

8 Data Source: Virginia Economic Development Partnership.

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Figure 8: Top 10 Localities for Cummulative VEDP Investment Announcements in Data Processing, Hosting, and Related Services – January 1, 1990 through December 1, 20159

Enhances Business Climate

Because Data Processing, Hosting, and Related Services is a very capital-intensive sector, it also has a disproportionately positive impact on localities’ largest source of tax revenue (property tax). But what might not be immediately obvious from that relationship is that this also places downward pressure on overall tax rates, thereby improving not only the locality’s business climate and economic attractiveness, but the state of Virginia’s as well.

Benefit/Cost Ratio

In this portion of the section, we evaluate the benefit/cost ratio that the Data Processing, Hosting, and Related Services sector provides to Prince William County. In accomplishing that task, we are able to take advantage of fiscal impact data provided by county personnel to better quantify the local fiscal benefit associated with this sector. Importantly, those data include fiscal impact assessments for both enterprise data centers that are owned and occupied

9 Data Source: Virginia Economic Development Partnership.

$0 $1,000,000,000 $2,000,000,000 $3,000,000,000 $4,000,000,000

Frederick County

Harrisonburg

Fauquier County

Chesterfield County

Culpeper County

Fairfax County

Henrico County

Mecklenburg County

Prince William County

Loudoun County

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by a single entity, and co-location data centers that lease space to one or more tenants.10 According to these data, the estimated fiscal impact of data center facilites in Prince William County was approximately $11.5 million in 2014.11 On the other side of the ledger, to quantify the fiscal cost that the Data Processing, Hosting, and Related Services sector imposed on Prince William County in 2014, we rely on data from the Virginia Department of Education on local elementary and secondary education expenditures per student, and data from the Virginia Auditor of Public Accounts on local non-education expenditures per county resident. Through this approach, we focus on the largest costs that any business imposes on a local government, the costs associated with providing primary and secondary education, and other county services, to the employees of that business. Table 1 details the calculations used to produce our estimates of the primary fiscal cost that the Data Processing, Hosting, and Related Services sector imposed on Prince William County in 2014. As shown in Table 1, we estimate those costs to have been approximately $2.7 million. As shown in Table 2, when we combine that estimated fiscal cost with the $11.5 million in estimated fiscal benefit, we are able to determine that the benefit/cost ratio associated with the Data Processing, Hosting, and Related Services sector in Prince William County was 4.3 in 2014. This means that for every $1.00 in county expenditures that the Data Processing, Hosting, and Related Services sector was responsible for generating in 2014, it provided approximately $4.30 in tax revenue to Prince William County.

10 The authors would like to express their gratitude to Jeffrey Kaczmarek, Executive Director of the Department of Economic Development for Prince William County for his assistance in developing and providing data without which this portion of our analysis would not have been possible. 11 It is important to note that this figure does not include business personal property tax payments for leased equipment.

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Table 1: Estimate of Total Fiscal Cost Imposed by the Data Processing, Hosting, and Related Services Sector on Prince William County in 2014

Prince William County

County Employment in Data Processing, Hosting, and Related Services in 201412 348

Students per Employee13 0.73

Per Student County Education Expenditures14 $4,664

Total Education Costs15,* $1,179,090

County Residents per Employee16 3.59

Per Resident Non-Education County Expenditures17 $1,206

Total Non-Education Costs18,* $1,508,424

TOTAL COSTS19 $2,687,514 *Products may differ slightly due to rounding.

Table 2: Estimated Benefit/Cost Ratio Associated with the Data Processing, Hosting, and Related Services Sector in Prince William County in 2014

Locality Estimated Fiscal Benefit20 Estimated Fiscal Cost Benefit/Cost Ratio

Prince William County $11,500,000 $2,687,514 4.3

12 Data Source: Virginia Employment Commission. 13 Data Source: Virginia Department of Education and Virginia Employment Commission. Derived by dividing total county elementary and secondary school enrollment in 2014 by total county employment in 2014. 14 Data Source: Virginia Department of Education. 15 Derived as county employment in Data Processing, Hosting, and Related Services, times students per employee, times per student county education expenditures. 16 Data Source: U.S. Census Bureau and Virginia Employment Commission. Derived by dividing total county population in 2014 by total county employment in 2014. 17 Data Source: Virginia Auditor of Public Accounts. 18 Derived as county employment in Data Processing, Hosting, and Related Services, times county residents per employee, times per resident county non-education expenditures. 19 Derived as total education costs and total non-education costs. 20 Data Source: Prince William County.

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Opportunity Cost

One of the most useful concepts in economics is the concept of opportunity cost – what is the cost of not doing something. Or in this case, what would have been the cost to Prince William County if its Data Processing, Hosting, and Related Services sector had not existed in 2014. The obvious answer is that the county would not have received the estimated $11.5 million in tax revenue that this sector provided that year. As a result, in order to maintain county expenditures at the same level that revenue would have had to come from other sources. The two most likely sources would have been: 1) additional education funding from the state triggered by the negative impact that this loss in tax base would have had on the formula Virginia uses to allocate education funding to localities, and 2) an increase in the county’s real property tax rate. On average, the state of Virginia funds 55 percent of primary and secondary education expenditures, and localities are required to fund the remaining 45 percent.21 But, that local funding percentage is adjusted up or down based on each locality’s “ability to pay” as measured by a “composite index” formula that takes into account the locality’s property tax base, adjusted gross income, and taxable retail sales. Of these three factors, property tax base receives the highest weight (50 percent) and, therefore, has the largest influence on the final calculation.22 The most recent composite index for Prince William County was 0.3848 (which means that the county’s share of its primary and secondary education expenditures was a little more than 38 percent).23 If we recalculate that index to take into account the loss of tax base implied by the $11.5 million loss in tax revenue that would have occurred if the county’s Data Processing, Hosting, and Related Services sector had not existed in 2014, it falls to 0.3817. As shown in Table 3, according to our estimates, this means that the state would have had to reallocate $1.8 million in state education funding away from other Virginia localities to provide that additional funding to Prince William County.

21 In actuality, however, baseline local funding percentages are typically higher than 45 percent because of local initiatives. 22 Data Source: Virginia Department of Education. The actual formula weights each locality’s property tax base by 0.5, adjusted gross income by 0.4, and taxable retail sales by 0.1. Each metric is then divided by school population and total population and those per capita figures are divided by the average across all localities to determine ability to pay. The per capita figures are then themselves weighted with each per capita school population metric receiving a weight of 0.66 and each per capita population metric receiving a weight of 0.33. 23 Data Source: Virginia Department of Education.

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Table 3: Estimated Additional Revenue Required to Compensate for loss of Data Processing, Hosting, and Related Services Sector in 2014 by Source

Locality Revenue Loss State Education Funding Off-Set

Required Additional Revenue from Real

Property Tax

Prince William County $11,500,000 $1,800,000 $9,700,000

The remaining $9.7 million in lost tax revenue would likely have been made up through increased property taxes (by far the largest source of revenue for most localities). Figure 9 depicts our estimate of the increase in Prince William County’s real property tax rate that would have been required to generate this $9.7 million in lost tax revenue. As shown, the county’s real property tax rate would have likely had to increase from $1.122 per $100 of assessed value to $1.145 (a 2 percent increase).

Figure 9: Estimated County Real Property Tax Rates with and without the Data Processing,

Hosting, and Related Services Sector in Prince William County in 2014

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Effect on Business Climate

In the not too distant past, Virginia typically scored at or near the top of most business climate rankings. In recent years, however, the state has lost significant ground relative to other states. Between 2010 and 2014, Virginia slipped from:

• 2nd to 4th in Forbes’ ”Best States for Business” ranking,

• 2nd to 8th in CNBC’s ”America’s Top States for Business”ranking,

• 2nd to 12th in the U.S. Chamber of Commerce’s ”Enterprising States” Ranking,

• 4th to 11th in Chief Executives’ ”Best and Worst States for Business” ranking,

• 4th to 10th in Site Selection Magazine’s ”Business Climate”ranking, and 2nd to 5th in Business Facilities’ ”Ranking Report.”

In most cases, these declines were largely driven by the Commonwealth’s recent lackluster employment growth. But tax rates, and particularly property tax rates, have also played a role. In the Tax Foundation’s ”2015 State Business Tax Climate Index,” Virginia’s overall state business tax climate was ranked 27th among the states, down from 23rd as recently as 2012.24 The primary reason for the Commonwealth’s low ranking, was that it was ranked in the bottom half of the states with regard to individual income tax, unemployment insurance tax, and property tax rates. In 2015, the Tax Foundation also published the ”Location Matters” report that performed a more comprehensive assessment of state tax climate from the perspective of seven specific types of industries.25 Among those seven were capital-intensive manufacturing and labor-intensive manufacturing. According to the Tax Foundation’s analysis, Virginia ranked:

• 20th among the states for mature capital-intensive manufacturers, and 49th among the states for new capital-intensive manufacturers (only Maryland was ranked worse than Virginia); and

• 2nd among the states for mature labor-intensive manufacturers, and 36th among the states for new labor-intensive manufacturers.

In explaining why Virginia was ranked so much more poorly for new firms as opposed to mature firms, and capital-intensive industries as opposed to labor-intensive industries, the Tax Foundation made clear that Virginia’s, ”high property taxes on equipment drive tax burdens on some firms, with a particularly dramatic effect on new operations.” Later focusing more

24 Scott Drenkard and Joseph Henchman, “2015 State Business Tax Climate Index,” Tax Foundation, 2015. 25 Tax Foundation and KPMG, “Location Matters: The State Tax Costs of Doing Business,” 2015.

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succinctly on new operations, they went on to say that new firms experience, ”heavy property tax burdens due to the state’s tax on equipment, which is more than double the national average.”26 These findings are of particular relevance to the capital-intensive Data Processing, Hosting, and Related Services sector in two ways. First, they point to the important role that property taxes play in general in business attraction and retention. As we have demonstrated, because the Data Processing, Hosting, and Related Services sector provides such a high benefit-cost ratio to Prince William County specifically, and localities generally, it enables them to maintain lower overall property tax rates than would otherwise be the case. This fosters a more favorable business climate for all businesses. Second, these findings make clear that Virginia is already at a significant competitive disadvantage relative to other states in regard to property taxes on equipment specifically. This is of particular significance to the Data Processing, Hosting, and Related Services sector, as these firms are not only extremely capital-intensive, but also must generally replace their capital equipment on an unusually short three to four year cycle. As a result, any further exacerbation of Virginia’s already significant competitive disadvantage in regard to taxes on capital equipment could have a disproportionately negative impact on the Data Processing, Hosting, and Related Services sector specifically.

Economic Impact

In this section, we more narrowly quantify the economic impact that the Data Processing, Hosting, and Related Services sector had on Prince William County in 2014.

Method

To empirically evaluate the statewide and regional economic and fiscal impact attributable to the Data Processing, Hosting, and Related Services sector, we employ a commonly used regional economic impact model called IMPLAN.27 The IMPLAN model use regional and national production and trade flow data to construct region-specific and industry-specific economic multipliers and uses these multipliers to quantify economic impact. For purposes of this analysis, we have further customized these internal IMPLAN assumptions based on proprietary data provided by a sub-set of Virginia data center firms to ensure that the specific

26 Tax Foundation and KPMG, “Location Matters: The State Tax Costs of Doing Business,” 2015, p.70. 27 IMPLAN v.3 is produced by Minnesota IMPLAN Group, Inc.

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model specifications we use reflect actual conditions within the Data Processing, Hosting, and Related Services sector as closely as possible. Economic multipliers measure the ripple effects that an expenditure has as it makes its way through the economy. For example, as when data centers purchase goods and services – or when data center employees use their salaries and wages to make household purchases – thereby generating income for someone else, which is in turn spent, thereby becoming income for yet someone else, and so on, and so on. Through this process, one dollar in expenditures generates multiple dollars of income. The mathematical relationship between the initial expenditure and the total income generated is the economic multiplier. The economic result of these ripple effects is called indirect impact when it refers to business to business transactions, and induced impact when it refers to household (employee) to business transactions. In the analysis that follows, we also provide estimates for three categories of impact. The first is employment, or the number of jobs that are created. The second is labor income, or the salaries and wages associated with those jobs. The third is economic output, or the total amount of economic activity that is created in the economy.

Results

In conducting our analysis of the annual economic and fiscal impact that the Data Processing, Hosting, and Related Services sector had on Prince William County in 2014, we employ the following assumptions:

• County employment in the Data Processing, Hosting, and Related Services sector was 348 in 2014.28

• Employer expenditures for employee health and dental insurance were $2,207,007 in 2014.29

By feeding these assumptions into the IMPLAN model, we obtain the estimates of annual economic impact shown in Table 4. As these data indicate, in addition to directly providing 348 jobs, $28.7 million in associated wages and salaries, and $103.3 million in county economic output in 2014, the Data Processing, Hosting, and Related Services sector was also responsible for generating the following second round indirect and induced economic activity within Prince William County: 1) 580 additional full-time-equivalent jobs, 2) $25.9 million in additional associated labor income, and 3) $78.6 million in additional economic output. In combination, this means that the Data Processing, Hosting, and Related Services sector’s total 2014 economic 28 Data Source: Virginia Employment Commission 29 Estimated based on proprietary data provided by a sub-set of Virginia data centers.

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impact on Prince William County was: 1) 928 jobs, 2) $54.6 million in labor income, and 3) $181.9 million in economic output.30 Table 4: Estimated Economic Impact of the Data Processing, Hosting, and Related Services

Sector on Prince William County in 2014

First Round Direct Economic Activity

Employment Labor Income Output

Total First Round Activity 348 $28,665,902 $103,323,928

Second Round Indirect and Induced Economic Activity

Employment Labor Income Output

Operations 553 $24,122,349 $75,094,967

Health Services 28 $1,812,704 $3,514,039

Total Second Round Activity* 580 $25,935,053 $78,609,006

Total, Direct, Indirect, and Induced Economic Activity

Employment Labor Income Output

TOTAL Economic Activity* 928 $54,600,955 $181,932,934

*may not sum due to rounding

30 It is important to note that this estimate of total economic impact is based on Data Processing, Hosting, and Related Services operations only. Due to a lack of data availability, it does not include expenditures for capital construction or capital equipment purchases. As demonstrated in Figure 7 of this report, those expenditures are in many years quite substantial. As a result, the economic and fiscal impact assessments presented in this report should be considered very conservative.

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Conclusion

This report has assessed the economic contribution that data centers make to Prince William County. That assessment has shown that Prince William County’s Data Processing, Hosting, and Related Services sector is a high wage/high growth sector that helped insulate the county from the ”double dip” that the state experienced as a result of the ”Great Recession of 2007” and the federal sequester in 2013. Data Processing, Hosting, and Related Services pays private sector average wages that are 2.2 times greater than the county norm for all private sector firms. In addition, the most recent one-year growth rate for private employment in this sector was 2.1 times greater than the norm across all county industries, while the five-year growth rate was 11.8 times greater. The Data Processing, Hosting, and Related Services sector is also a very capital-intensive industry. That makes it a high performer in terms of the tax revenue it provides as well, because that disproportionate investment in capital equipment translates into a disproportionate amount of property tax revenue. Our analysis has shown that the benefit/cost ratio for this sector was 4.3 in Prince William County in 2014. This means that for every $1.00 in county expenditures that the Data Processing, Hosting, and Related Services sector was responsible for generating that year, it provided approximately $4.30 in county tax revenue. Finally, our analysis has also shown that the Data Processing, Hosting, and Related Services sector has a large economic impact on Prince William County. According to our estimate, that total economic impact was approximately 928 jobs, $54.6 million in wages, and $181.9 million in economic output in 2014. In short, the data center industry makes a significant, growing, and demonstrable contribution to Prince William County’s economic prosperity.

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Northern Virginia Technology Council

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